Iceland exports energy as data

Iceland’s main exports are aluminum and fish. Now the isolated nation is hoping to offer the world a new commodity: a cheap, guiltless way to store its data.

In February, a startup called Verne Global opened a large server farm on an old NATO base near Iceland’s main airport and began offering “100% renewable” computing services to the rest of the world. It’s one of three data centers in Iceland and part of what Iceland’s government hopes will be a new local industry. Iceland produces more electricity per capita than any other country in the world. Nearly all its power is renewable, coming from either glacier-fed rivers or steaming geothermal vents. And it’s cheap, too. At 4.3 cents per kilowatt-hour, electrons on the island cost around half the average retail rate in the United States.

About four-fifths of Iceland’s electricity is currently used to smelt aluminum. Big companies like Alcoa have set up facilities to take advantage of cheap power; they then export the metal. According to the government’s master plan for hydropower and geothermal resources, Iceland could double its power generation. But environmentalists oppose expansion of the aluminum industry.

That has Iceland’s government looking to attract new power-intensive industries. Data centers use up to 2 percent of electricity produced in the United States and are the fastest-growing source of electricity consumption globally. By 2020, according to some estimates, the data centers that store e-mails, Web files, and all manner of documents could be drawing 1,300 terawatt-hours of electricity yearly, or four times 2007 levels.

The right sales pitch could grab Iceland a share of that market. Invest in Iceland, a government-funded agency in Reykjavik, estimates that Verne’s data center, the largest of the three on the island, could create up to 100 jobs for Icelanders. While that’s a modest start, things “can move really fast if some large players in the market decide to set up,” says Arnar Gudmundsson, a project manager at Invest in Iceland.

Another country might sell electricity to energy-hungry neighbors. But Iceland lacks neighbors. Every decade or so, someone runs the numbers to see what it would cost to plug the country into Europe’s electricity grid. Depending on where it made land, the cable would have to be around twice the length of the longest existing undersea power link, which stretches 580 kilometers between Norway and the Netherlands.

Last year, a study by Landsvirkjun, Iceland’s state-owned energy company, concluded that the cable could be economically feasible, though it would cost two billion euros. Still, it could take a decade to plan and build, estimates Óli Grétar Blöndal Sveinsson, Landsvirkjun’s executive vice president for research and development.

Meanwhile, Iceland already has three fiber-optic links to North America, Scotland, and Denmark, and there are plans to lay a new 100-gigabit-per-second undersea cable along a great circular path stretching 6,700 kilometers from New York to Canada, with a branch to Iceland. “It’s far more expensive to export energy than the data, and the data is more valuable,” says John Pflueger, principal environmental strategist for Dell and a director of Green Grid, an industry group. “Iceland can be a net exporter of information and derive value from that.”

Iceland won’t work as a location for every application. Even moving at the speed of light, data takes 36 milliseconds to reach New York. That rules the island out as a site for certain time-sensitive computations: high-speed traders, for example, need to be within a few miles of stock exchanges.

But the renewable sources of Iceland’s power could give the country an edge. Greenpeace last year published a report excoriating major tech firms, including Apple and Facebook, for relying on coal and nuclear energy to power server farms. “We see this infrastructure being quite critical to a low-carbon economy,” says Gary Cook, senior information technology analyst for Greenpeace in San Francisco. “We need to put them in the right places.”

Among Verne’s first clients is Greenqloud, a cloud computing operation that bills itself as “100 percent carbon neutral.” However, Verne marketing manager Lisa Rhodes says it’s “still debatable” whether green energy will be a major selling point. She says Verne, whose facility has access to 50 megawatts of power, picked Iceland to set up shop mostly because of its cheap electricity rates.

First published in the April Business Impact supplement to Technology Review: [html] [pdf].